Skip to main content
Home
  • English
  • العربية
  • SUPPORT
  • Log in
  • JOIN EXINITY
  • Markets
    • Markets

    Explore global financial markets

    Individual stocks
    • Stocks
    • Stock CFDs
    Forex and commodities
    • Forex pairs
    • Commodities
    Indices
    • Indices
    • Currency indices
  • Ways to trade
    • Ways to trade

    Explore our services at a glance

    • Exinity World

    Get pure investing simplicity and build a global portfolio from just $20

    • Exinity Trader

    Been trading for a while?
    Say hello to Trader

    • Exinity Trader Pro

    Pro, meet pro.
    The service for experienced traders

  • Edge
    Edge

    The markets are full of opportunity, but you won’t find it by accident. Edge puts useful and jargon-free insight at your fingertips.

    Edge library
    • Understanding the markets
    • Analysis and forecasting
    • Understanding risk and returns
    • Learning from experience
    Trading ideas
    • What our experts say
    • Meet our experts
  • About

What our experts say

Why the NFP matters and why investors are fretting now that we are in September

Kathleen Brooks
Independent Analyst
03.09 @ 11:05 GMT
Kathleen Brooks

This week has seen moderate increases for stock markets. The end of the summer holidays are fast approaching, but markets are still sleepy as they contemplate an NFP report on Friday, next week’s ECB meeting and a torrent of economic data that, so far, suggests that the major global economies are just about managing to stay on track despite a rapid increase in Covid infections. The S&P 500 is up some 60 points this week, which is nothing much to write home about, however, it could push the US index to another fresh record high. Elsewhere, the Nasdaq is edging higher as we move towards the all-important US payrolls report on Friday even though it has been fairly flat on the day as traders prefer to play the reflation trade.

Growth fears: are they overdone?

On the topic of the reflation trade, this week it has shown more signs of life, for example on Thursday Boeing was up more than 2.2%, on the back of news that the US aviation giant is joining the space race and has invested in Virgin Orbit, and Malaysia lifted the ban on the Boeing 737 Max jet, after grounding this aircraft for two years after crashes involving Boeing planes in recent years. This doesn’t change the general tone in markets since earlier in the summer that suggests markets are pricing for a downgrade to global growth prospects in the US, Europe and to a greater extent China. This is partly to be expected as the boost to the global economy from the reopening after months of Covid lockdowns earlier this year is set to fade, while at the same time supply chain bottlenecks take longer to ameliorate and thus keep inflation high in the system. This has led to a move towards defensive sectors in recent months, which includes some of the bigger names in the tech sector. Facebook and Alphabet have seen their share prices rise sharply in recent weeks, while Apple shares jumped earlier this week, as its share price is once again in record high territory. Thus, as we move towards the payrolls report on Friday the market is finely balanced between coveting defensive stocks and the big names in the tech sector, at the same time as dipping their toes back into the reflation trade in case we get another whopper of an NFP number.

When Treasury yields and the dollar drift apart

The positive mood in stock markets has even allowed the beleaguered video meeting service Zoom to stabilise after sharp losses earlier this week. It is also weighing on Treasury yields, with the yield on 10-year Treasuries pushing higher (yields move inversely to price), and it is now at 1.31%, compared with 1.25% ahead of last week’s Jackson Hole symposium. The FX space is trading flat, with limited gains for the euro and GBP. EUR/USD is at its highest level since the start of August and is trading above $1.1860. There could be further gains in store for this pair, however, beware volatility if we get a strong payrolls number. Elsewhere, GBP/USD is also back above $1.38, thus do not expect the dollar to move in line with Treasury yields in the current environment. Strengthening economic data combined with a dovish Federal Reserve can be a toxic mix for the USD, and we prefer to be cautious on USD longs in the medium to long term.

What’s going on with Alibaba and Chinese companies?

Oil is also moving on Thursday, and Brent crude is up some 2.5% after Opec went ahead with its planned supply hike. Rather than weigh on the price of crude this is seen as a positive sign since it suggests that underlying demand is rising. We would also like to point out that Alibaba’s share price had started to increase earlier this week, although its share price ended up falling slightly on Thursday, after the world’s largest online and mobile commerce company pledged to spend billions on the Chinese Premier’s “common prosperity” vision in an effort to acquiesce Chinese regulators who have clamped down on internet companies that it sees are at odds with its own economic philosophy. While this could take some of the pressure off of Alibaba and others that have suffered from Beijing’s economic crackdown in recent months, it is also a worrying sign for investors: mega companies paying for the implementation of government policy is not something that goes down well with Western investors, thus we could see Chinese companies continue to come under scrutiny and we do not think that this is a turning point for Chinese shares.

NFPs: what to expect

Before we sign off, we would like to remind you that US Payrolls are expected at 750k for August, which is lower than the 900k+ readings of the last two months. Average hourly earnings are expected to rise 0.3%. We think that a reading in line with expectations could be neutral for the USD, however a stronger than expected average monthly earnings figure for August could see the dollar rise and EUR/USD and GBP/USD both turn sharply lower in the short term.

Disclaimer: This material is comprised of personal opinions and ideas. It should not be construed as an investment recommendation or a solicitation for any transaction. It does not imply any obligation to purchase investment services, nor does it guarantee or predict future performance. Exinity, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Ready to jump into the markets?

Choose your Exinity experience and create your account in minutes

JOIN EXINITY
  •  
  •  
  •  
  •  
Home
  • About us
    • Exinity Group
    • Careers
    • Company news
    • Meet our experts
  • Useful links
    • Trading platforms
    • Trading tools
    • Trading hours
  • Support
    • FAQ
    • Contact us

The services on the Website are provided by Exinity Limited (exinity.com), regulated and licensed by the Financial Services Commission of the republic of Mauritius with an Investment Dealer License bearing license number C113012295.

Card transactions are processed via Exinity Services Limited (EU merchant company), a company incorporated in the Republic of Cyprus with company number ΗΕ 400404, registered office at 64 Agiou Georgiou Makri, Anna Maria Lena Court, Office 201, 6037, Larnaca, Cyprus and regulated by the laws of Cyprus. Address for cardholder correspondence: [email protected] Business location address: 35 Lamprou Konstantara, Kato Polemidia, 4156, Limassol, Cyprus.

Exinity ME Ltd is registered under the Laws of the Abu Dhabi Global Market (“ADGM”), with registered offices at 16-104, 16 Floor, Al Khatem Tower, ADGM Square, Al Maryah Island, Abu Dhabi, UAE. It is regulated by the Financial Services Regulatory Authority (“FSRA”), Financial Services Permission Number 200015 and is a duly licensed Category 3A Firm authorized to provide financial products and services to persons who meet the qualifying criteria of a Professional Client as defined by the FSRA rules.

Risk Warning: Trading Forex and Leveraged Financial Instruments involves significant risk and can result in the loss of your invested capital. You should not invest more than you can afford to lose and should ensure that you fully understand the risks involved. Trading leveraged products may not be suitable for all investors. Trading non-leveraged products such as stocks also involves risk as the value of a stock can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. Before trading, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary. It is the responsibility of the Client to ascertain whether he/she is permitted to use the services of the Exinity brand based on the legal requirements in his/her country of residence. Please read Exinity’s full Risk Disclosure.

Regional restrictions: The Exinity brand does not provide services to residents of the USA, Japan, New Zealand, Canada, Mauritius, Haiti, Hong Kong, Suriname, the Democratic Republic of Korea, Puerto Rico, the Occupied Area of Cyprus.

© 2021 Exinity

Terms and agreements   |   Privacy   |   Cookies